Sequential gets $169.5 million of term loans, $90 million revolver

By Angela McDaniels

Tacoma, Wash., April1 4 – Sequential Brands Group, Inc. amended and restated its first-lien credit agreement to provide for a $85 million term loan A, a $15 million term loan A-1 and a $90 million revolving credit facility with a $10 million swingline subfacility, according to an 8-K filing with the Securities and Exchange Commission.

The company also amended and restated its second-lien credit agreement to provide for $69.5 million of new term loans in addition to the $90 million of existing term loans.

The company entered into agreements to amend and restate the credit agreements on April 1, and the agreements became effective on April 8, which was the closing date for the company’s acquisition of the Jessica Simpson brand.

The proceeds were used to finance the acquisition and to repay Sequential’s existing debt.

At closing, the company had $100 million of term loans and $40.68 million of revolving loans under the first-lien credit agreement and $159.5 million of term loans under the second-lien credit agreement for a total of $300.2 million of loans.

The first-lien credit agreement has a $60 million accordion feature to be allocated 25% to the revolving credit facility and 75% to the term loan A, and the second-lien credit agreement provides for incremental borrowings of up to $40 million for the purpose of completed permitted acquisitions.

The company expects to use the proceeds of any additional revolver borrowings for working capital, capital expenditures and other corporate purposes and any borrowings under any incremental facilities for working capital purposes and/or for permitted acquisitions.

First-lien terms

The tenor of the first-lien term loans is five years.

The interest rate is Libor plus 350 basis points to 375 bps for the revolver and the term loan A and Libor plus 450 bps to 475 bps for the term loan A-1. The margin depends on the company’s loan to value ratio.

The first-lien loans are voluntarily prepayable from time to time.

Term loan borrowings under the first-lien credit agreement will be subject to amortization payments of $4 million per quarter. If the loans have not been prepaid with the proceeds of a capital raise by the company within one year, then the amortization payments will increase to $5 million.

All voluntary and mandatory prepayments of the term loans will be applied first to prepay the tranche A-1 term loans.

Second-lien terms

The second-lien credit agreement is not subject to amortization and will mature after six years.

The interest rate is Libor plus 800 bps to 1,000 bps depending on the company’s consolidated total leverage ratio and consolidated net leverage ratio.

The company may prepay up to 25% of the second-lien loans during the first year and any amount of the loans after one year, in each case subject to prepayment premiums in certain cases.

Mandatory prepayments are required under certain circumstances.

Bank of America, NA is the administrative agent for the first-lien credit agreement, and Wilmington Trust, NA is the administrative agent and collateral agent for the second-lien credit agreement.

Sequential Brands is a New York-based owner, promoter, marketer and licenser of a portfolio of consumer brands in the fashion, active, and lifestyle categories.

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